Alliance Global Group Inc. said it will spend up to 5.1 billion pesos ($108 million) to buy shares in Megaworld Corp.’s planned 9 billion-peso rights offer.
Alliance will buy shares up to the extent that it’s entitled to in the rights offer, including any passed up by other stockholders, the Manila-based company said in a statement to the stock exchange. Alliance said its budget for the rights offer will not be less than 2.4 billion pesos.
Manila-based Megaworld plans to offer one share for every four held by shareholders at one peso each to help fund a 30 billion-peso, three-year capital spending plan. The rights offer will also come with warrants that allow its holders to buy one share for every warrant held.
Megaworld sank 6.7 percent to 56 centavos at the noon close of trading in Manila today, reaching a two-month low on concern investors will shun its rights offer because it’s priced at a premium relative to the stock’s market value. The benchmark Philippine index closed up 1.4 percent.
“Against an environment of decelerating property demand and the company’s net cash position, the timing of the rights issue is questionable and would likely be taken negatively by the market,” Kelly Lim-Bate, an analyst at JPMorgan Chase & Co., said in a report released today. “Lack of catalysts may keep the stock trading at distressed valuations in the near term. This issuance will likely be taken up primarily by Alliance.”
Alliance, which holds about 46 percent of Megaworld, fell 3.5 percent to 1.66 pesos, its biggest loss in a month. Alliance’s stake in Megaworld could go up to 55 percent after the rights offer, according to JPMorgan.
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